Spot values at a glance:
Stocks in Asia rose, with technology stocks rebounding following its biggest selloff of the year last week. The yen fell with oil and gold, while the US dollar maintained near Friday’s low.
- Housing starts in May was 5.5% lower from a month ago, accelerating its declined from a 2.8% drop in April and missing the median estimate of a 4.1% gain.
- The University of Michigan sentiment index slipped to 94.5 this month, from 97.1 in May.
- The Fed should not raise interest rates again without confidence that inflation is heading towards tis 2% target, said Dallas Fed President Robert Kaplan, while Minneapolis Fed chief Neel Kashkari said he opposed the central bank’s decision to hike this week because of recent softening in price pressures. Kaplan had voted for the rate hike last week, while Kashkari dissented.
- Political wrangling in Washington took another turn over the weekend. US President Donald Trump isn’t under investigation by special counsel Robert Mueller, a member of the president’s legal team said, despite Trump’s repeated comments on social media that he’s the target of a “witch hunt”.
- The US dollar was largely unmoved over the weekend; the Bloomberg Spot Dollar Index was 0.3% lower last Friday.
- The benchmark 10yr Treasury yield edged 1bp higher to 2.16% this morning, after previously ending last week at 2.15%.
- The S&P 500 Index ended Friday almost unchanged, despite losses stemming from food retailers after Amazon.com agreed to buy Whole Foods Market Inc.
- Manufacturing sales in April advanced 1.1% from a month earlier, accelerating from March’s 0.8% rise and beating the median estimate of 0.9%.
- A Bloomberg survey of 17 economists found the majority now project a rate increase this year. 6 predict higher rates in October and 2 suggest a September hike. That’s an about face from a week ago, when only 2 predicted rates would rise in 2017.
- According to Bloomberg calculation son overnight index swaps, traders are pricing in a full 25bps hike to the central bank’s 0.5% benchmark interest rate by December.
- The shift comes after Governor Poloz and his senior deputy Wilkins jolted markets in separate statements this week with explicit language about the prospect of higher rates.
- Prime Minister Theresa May is due to start Brexit negotiations with the EU today. The odds of a ‘hard Brexit’ have dropped significantly after the snap elections of June 8 left the Conservatives as the largest party with no majority. UK business leaders have called for a softer Brexit – a deal with the EU that will allow tariff-free trade, “minimal customs formalities” and mutual recognition of the rules and standards to ensure continued mutual access for goods and services.
- Macron’s Republic on the Move movement is on track to win about 350 seats in the 577-strong National Assembly, according to early results. That would be the biggest majority in 15 years. However, Sunday’s turnout of about 44% of voters was the lowest ever for a French legislative election and 10 percentage points below the previous record, a reminder that almost half of the vote in April’s first round of the presidential election went to candidates opposed to the open borders and free markets of the EU that Macron favours.
- China’s home prices increased in fewer cities last month in the wake of cooling measures imposed by local authorities. New home prices, excluding government-subsidized housing, gained from the previous month in 56 of 70 cities tracked by the government, compared with 58 in April, the National Bureau of Statistics said on Monday. Prices fell in 9 cities and were unchanged in 5.
- Japan had a surprise trade deficit in May, as stronger-than-expected imports overpowered the best export growth in more than 2 years.
- Exports last month rose 14.9% from a year ago, accelerating upon April’s 7.5% gain but less than the consensus estimate of 16.0%.
- Imports gained 17.8% over the same period, quickening from 15.2% in the month prior and exceed the 14.5% expected.
- Japan’s trade has seen a sustained pickup since the start of the year, with 5 consecutive months of growth in both exports and imports. It’s indicative of an increasingly healthy global economy and a relatively competitive yen. The BOJ has expressed optimism that private consumption will join exports in helping drive Japan’s economic recovery.
- RBA Governor Philip Lowe said his economy is capable of faster growth if lawmakers can overcome political gridlock, while warning weak wage gains are likely to keep plaguing developed nations.
- He warned that the average per capita income in the next couple of decades was likely to be lower than in the past 25 years, a period when Australia’s economy has managed to avoid a slump.
- Lowe further cited 3 major reasons for weakness in wage growth in Australia:
- Slowing productivity growth
- More competition from foreigners and robots
- People valuing employment security in an uncertain world and feel they can increase it by not asking for a bigger wage rise.
- According to Bloomberg news, gold could be heading for a turning point. The Fed reiterated plans for another hike in 2017, while the ECB is reviewing whether to maintain its loose monetary policy. Investors in SPDR Gold Shares, the largest ETF backed by bullion, are pulling money out at the fastest pace this year.
- Spot gold retreated 0.2% to $1,251.24/Oz earlier, its lowest level in 3 weeks. The precious metal has fallen below the $1,260/Oz handle, which could be a worrying sign for gold bulls. The next region of support lies below at the $1,240/Oz support, where the 200-day moving average resides as well.
- Silver for immediate delivery fell to a fresh 3-week low as well, 0.5% lower to $16.6215/Oz.
- Crude oil futures expiring in July slipped 0.7% to $44.45/bbl earlier, after a fourth weekly loss on speculation that a record expansion by US drillers will blunt OPEC-led efforts to rebalance an oversupplied market.
- US drillers targeting crude added rigs for a 22nd straight week, the longest stretch in 30 years, according to data on Friday from Baker Hughes Inc.
- Demand will rise during the third quarter, according to Suhail Mohammed Al Mazrouei, energy minister for the UAE.
- The low last month of $44.13/bbl remains as the next level of support.
- Spot 1.3818
- USDSGD retreated from a 3-week high reached last Friday, falling earlier today by as much as 0.1% to 1.3809.
- The pair looks poised for more sideways movement between 1.3800 and 1.3900 despite a brief spike down to 1.3700 last week.
- Spot 0.7620
- AUDUSD continues to be well bid above the 0.7600 handle, and looks set to retest its high from last week. The pair was 0.1% higher earlier today at 0.7629.
- Spot 1.3218
- USDCAD held onto losses following a 0.5% decline last Friday to 1.3210.
- The pair is currently supported around the 1.3200 handle, but a convincing break below it may drive the pair lower to the next support at 1.3000.
- Spot 6.8114
- The PBOC earlier strengthened its fixing rate by 0.03% to 6.7972 per US dollar.
- USDCNH was little changed earlier today, comfortably holding above the 6.8000 level for the second straight day.
- Spot 111.06
- USDJPY earlier gained 0.2% to 111.14 following Japan’s surprise trade deficit in May. Adding to this, the prevalent risk-on environment today further dented demand for traditional safe-haven assets such as the yen.
- Spot 1.2771
- GBPUSD remains capped at the 1.2800 resistance, falling 0.3% to 1.2744 earlier today, as the pair looks poised for more sideways movement between 1.2600 and 1.2800.